Need Rs 30,000 crore a year, use 4 times this on just PDS

Now that the World Bank, the high priest of poverty, has announced India’s poverty in FY12 was 12.4% and not 21.2% as believed earlier, the government needs to not just urgently relook its data—the SECC says that a third of rural Indians are poor but that is full of holes (goo.gl/QWx05F)—but also its entire anti-poverty strategy. The World Bank’s poverty numbers aren’t, though, really new, they are just accepting a view that analysts such as FE columnist Surjit Bhalla have been arguing in favour of for years, that the 7-day recall period is better than the 30-day one since people—the NSS has two surveys for consumption—are more likely to remember what they ate in the last week than in the last month; in both 2009 and 2011, the 7-day recall period showed a 9% higher consumption, and hence a lower poverty number. Indeed, the same exercise was also done in 1999 but was junked since the 7- and 30-day questions was asked to the same sample and poverty experts argued this distorted the reporting—since 2009, the samples canvassed have been different.

Even the 12.4% number, of course, needs to be looked carefully since the NSS does not capture all the consumption which, for instance, the GDP data does—typically, the consumption number that you get from the NSS for the country is around half what you get from the GDP data; that means any poverty estimate based on NSS data is always an overestimate of actual poverty. This becomes clear from the all-India PRICE Survey on incomes and assets. A little over 15% of this bottom 12% of the population in FY14, it turns out, owned a motorcycle—probably a 4th- or a 5th-hand one, but if you can pay for petrol and have somewhere to drive to, it does put a question mark over the poverty data; nearly 40% of this bottom 12% has colour TVs, over 70% have mobile phones. But let’s assume this 12.4% is poor since, in any case, poverty should never be based on an absolute income/consumption number as it is today, but should be relative to the incomes of the rest of the population. There are important lessons even then. For one, as the PRICE data shows, nearly 80% of these households do not even have members who have studied beyond class X. Just 7.5% of these households have regular salaries and just 15% live in cities—more education, jobs and urbanisation are the cure for poverty, not just more anti-poverty spending.

While all of these, no matter how desirable, will take time to create, the biggest scandal, though never reported as such by the CBI or the CAG, is the anti-poverty spending in the country. In FY12, based on the Tendulkar poverty line, a person was considered poor if she had a monthly consumption of under Rs 893 while the actual consumption of the poor was Rs 730. In which case, the government needs to transfer just Rs 163 per person per month through direct benefit transfers (DBT) to eliminate poverty—that means India needs to spend under Rs 30,000 crore a year as compared to the Rs 125,000 crore being spent on just food subsidies this year. For prime minister Narendra Modi to run a completely corruption-free government, as he claims he is doing right now, he needs to speed up the implementation of DBT-Aadhaar.